gold bars in a stack

Maximizing Profits: Tips on How to Trade Gold in Australia

Hours Hours Updated on

If you buy gold for your investment collection right now, it can help keep your money more secure and spread out, so you don’t lose everything in case the stock market or prices go crazy.

Here’s what you need to consider when purchasing gold in Australia.

stacks of gold coins

How Is Gold Valued?

Gold is worth different amounts depending on how much of it there is and how pure it is. 

The people who sell gold figure out how much it’s worth by looking at how much there is and how pure it is and then multiplying it by the “gold spot price.” 

Knowing which platforms provide updated information is essential to monitor gold prices in real time.

These platforms typically update their information every five minutes, allowing buyers and sellers to stay up-to-date on the value of gold at any time, day or night.

How Is the Purity of Gold Measured?

Just because something is shiny and looks gold doesn’t mean it’s gold. Sometimes people mix other metals in with gold. 

The amount of gold in the mixture is measured in “karats”. The number of carats tells you how much of the mix is actually gold. 

The more karats, the more gold there is in the mixture. The highest number of karats is 24, which means the mixture is almost all gold. If the mixture is 100% gold, it’s called “pure” and has 24 carats.

Let’s look at how gold purity is based on the karat value.  

How can you ensure your Aussie dollars are worth their weight in gold? 

Here are the top ways to put your money where your glimmering dreams are:

  1. You can buy gold bars or coins you can hold in your hand, called “physical gold bullion.”
  2. You can buy stocks in companies that mine or sell gold, called “investing in gold stocks.”
  3. You can buy a “gold ETF,” a digital version of gold that you can buy and sell online.
  4. You can also trade gold through the “futures market,” which is like making a bet on whether the price of gold will go up or down.

Physical bullion:

People often buy physical gold as coins and bars to keep as valuable assets. This is true for both regular folks and banks. However, the high cost of storing and insuring physical gold can stop some people from buying it.

Gold Stock: 

Investing in gold stocks or shares is a way to invest in gold indirectly. This type of investment allows you to gain exposure to all aspects of the gold industry, including mining, production, funding, and sales. 

However, it’s essential to know that gold stocks sometimes move in different ways than physical gold because other factors can impact the prices of shares.

Exchange-traded funds (ETFs)

ETFs are investments that allow you to buy a little bit of many different gold mining and production companies all at once. This can be a great way to diversify your investment and lower your risk. 

ETFs simply track the overall market instead of trying to outperform it. They are a good option for those who want to invest in gold, but don’t want to do it through buying individual company stocks.

Here are some examples of ETFs available on the Australian Market:

  1. ETFS Physical Gold (GOLD.AX) — This ETF tracks the price of physical gold and is designed to provide investors with a cost-effective and secure way to invest in gold. Each unit represents ownership of one-tenth of an ounce of physical gold bullion stored in a secure vault.
  2. BetaShares Global Gold Miners ETF (MNRS.AX) — This ETF invests in a broadened portfolio of gold mining and production companies, exposing investors to the global gold industry. MNRS.AX aims to track the performance of the NASDAQ Global Gold and Precious Metals Index.
  3. VanEck Vectors Gold Miners ETF (GDX.AX) — This ETF also invests in gold mining and production companies but focuses on larger, more established companies. GDX.AX aims to track the performance of the NYSE Arca Gold Miners Index.

Future markets:

When you invest in futures contracts, you agree to exchange gold for a fixed price later. This can be done through either physical delivery or cash settlement.

The terms of these contracts are predetermined, so you know exactly what you’re getting. However, the contract’s price can still fluctuate based on market conditions

Just like other investments, any gains you make from investing in gold, whether by owning gold directly or through other methods, may be subject to capital gains tax (CGT).

If the value of your investment-grade gold bullion increases from when you purchased it to when you sell it, you may be required to pay capital gains tax on the profit. It’s essential to consider the potential tax implications of investing in gold.

The Forces That Move the Price of Gold

The price of gold can be very volatile based on how much people want it and how much of it is available. Many things can affect the demand and supply of gold, such as:

Worldwide Demand: 

Gold is a precious metal that is in high demand all over the world. Since the 1970s, the demand for gold has quadrupled every year, driving up the price of the metal. This demand comes from various sources, including jewelry makers, technology companies, central banks, and individual investors. 

Diamond Jewellery demand accounts for roughly 50% of the global demand for gold. Another significant source of demand is exchange-traded funds (ETFs), which comprise about 29% of the worldwide demand.

The many uses for gold make it an important asset, with its value impacted by various factors, including supply and demand.

Production:

Gold production is declining because most of it has been mined. Scientists are using new tech to detect gold and explore space. The limited supply of gold means recycled gold will meet demand. If demand increases and supply decreases, the gold price will go up.

Interest Rates:

Investors often turn to gold during uncertain times in politics or the economy, as it’s considered a safe investment against inflation and currency devaluation. 

During the Covid-19 crisis in 2020, gold prices increased more than 13% as investors withdrew from cash and turned to the precious metal to counter the instability. 

However, too much demand for gold can create a price bubble that could cause prices to fall. To manage risk, gold traders diversify their investments and use stop-losses.

CONCLUSION:

Investing in gold is an excellent way to preserve your wealth during high inflation and market uncertainty. Although the price of gold is volatile, it has consistently increased in value over the past three decades. 

Whether you prefer physical gold, mining shares, or gold-based funds and ETFs, having a diversified portfolio that includes gold investments is critical.

Remember to carefully consider your investment options and assess your risk tolerance to ensure that investing in gold is your right choice.